Flange Economics (Part 2): How Fluctuations in the US Dollar are Changing Flange Prices

Like input costs, fluctuations in the value of the US dollar (vs foreign currency) also affect the flange supply curve.  In fact, many of the same principles will apply from Part 1.  In this analysis, the Rupee (INR) will be used as the foreign currency, since the largest number of import carbon steel flanges is imported from India.

The chart below shows the fluctuations of the USD vs. INR across the past two years, and while the net change is roughly zero, it has fluctuated significantly during this time period.  Consider USD value in December 2016 and again in August 2017.  Relative to INR, USD decreased 10%, decreasing the willingness of Indian manufacturers to sell flanges at previous prices.   This results in a leftward shift in the supply curve (similar to Figure 1) and an increase in flange prices.  Please note that an increase in the value of USD would create a rightward shift of the supply curve and a decrease in flange prices.

carbon steel flanges

Figure 3: Fluctuations in ISD vs INR during the past two years

The leftward shift in the supply curve from December 2016 to August 2017 will cause import carbon steel flange prices to increase somewhere below 10%.  However, since the US market is driven by cost-based pricing, this shift will not impact the US market for approximately 6 months (the approximate time it takes for an order placed overseas to arrive in the US).  Therefore, flange price forecasting (for 6 months in the future) can be speculated by monitoring the value of the USD.